McDonald’s Sales Hurt by Fourth-Straight U.S. Drop

A pedestrian walks past McDonald's Corp. signage in front of a restaurant in San Pablo. Photographer: David Paul Morris/Bloomberg

March 10 (Bloomberg) -- McDonald’s Corp., the world’s
largest restaurant chain, said sales at stores open at least 13
months fell 0.3 percent in February as its U.S. business slumped
for the fourth straight month amid harsh weather.

Analysts estimated a 0.1 percent decline, the average of 15
projections from Consensus Metrix. Domestic same-store sales
slid 1.4 percent, Oak Brook, Illinois-based McDonald’s said in a
statement today, while analysts anticipated a drop of 0.6
percent in the U.S.

McDonald’s, which has more than 14,200 U.S. locations, has
been trying to attract Americans with coffee and breakfast
foods. The fast-food industry also is struggling with shaky
consumer confidence and a severe winter that McDonald’s says
hurt its U.S. sales last month.

“Weather was definitely an impact in the month of February
-- that’s going to be a drag on everybody,” Peter Saleh, a New
York-based analyst at Telsey Advisory Group, said in an
interview. Also, rival fast-food chains are introducing new
items, improving stores and drawing U.S. diners away from
McDonald’s, he said.

“The other players from Wendy’s to Jack in the Box to
Sonic to Burger King have just improved their game a little bit
and they’re taking back some share,” he said.

The shares fell 0.3 percent to $95.20 at the close in New
York. McDonald’s has slid 1.9 percent this year, while the
Standard & Poor’s 500 Restaurants Index has dropped 1.7 percent.

Pressuring Margins

Little-changed global comparable-store sales so far this
year will pressure margins in the first quarter, McDonald’s
Chief Financial Officer Peter Bensen said in the statement.

While U.S. consumer sentiment rose in February after
declining in January, the economy expanded at a slower pace in
the fourth quarter than was previously estimated. Smaller gains
in consumer spending, inventories and exports are weighing on
the economy and indicate less momentum heading into 2014.

McDonald’s, along with other chains, is trying to draw
diners and boost revenue in the morning. While it pushes new
McCafe beverages and $1 coffees, Starbucks Corp. is revamping
its breakfast sandwiches, and Yum! Brands Inc.’s Taco Bell is
rolling out breakfast foods, such as sausage burritos and waffle
tacos, to its U.S. stores this month. Burger King Worldwide Inc.
also has said it’s focused on improving and advertising its
morning menu.

The fast-food industry also is facing increased scrutiny
from lawmakers about employees’ wages. Democratic
Representatives George Miller of California and Joe Courtney of
Connecticut on March 6 sent letters to chains including
McDonald’s and Yum Brands seeking information on their franchise
agreements, worker-training materials and wage- and hour-law
violations.

European Sales

McDonald’s February same-store sales rose 0.6 percent in
Europe and fell 2.6 percent in the company’s Asia Pacific,
Middle East and Africa region. Analysts estimated drops of 0.1
percent and 1.1 percent, respectively, according to Consensus
Metrix, which is owned by Kaul Advisory Group in Wayne, New
Jersey. Same-store sales declined 8.7 percent in Japan last
month.

Breakfast foods and extended hours contributed to a
“strong performance” in the U.K. and positive same-store sales
in France, McDonald’s said.

Comparable-store sales are considered an indicator of a
retailer’s performance because they include only older,
established locations. McDonald’s has about 35,400 restaurants
worldwide and 81 percent of those are franchised.